Market Report / Tel Aviv Stocks Gain, Bonds Sink

Trends aped Wall Street on Friday, where stocks rose 1% and the dollar rallied while treasuries retreated.

Tel Aviv shares rose Sunday for the fifth time in six trading days, but bonds fell hard, in the wake of falling bond prices on Friday in the United States.

The benchmark TA-25 index rose 0.6%, breaching 1,200 points again, to close at 1,202.15. The TA-100 index was up 0.7% to 1,083.19. Turnover, however, was a mere NIS 431.7 million.

Shares were broadly higher, with the TA-Communications index the only industry to finish lower, paced by a 0.6% decline in Bezeq in relatively heavy trading of NIS 12.9 million. 

Biotech shares were ahead strongly, with the index up 1.6% to 863.65. Indeed, the biggest gainers among TA-100 stocks were biotechnology company Kamada, which gained 3.2%; Prolor Biotech, which advanced 3%; and Given Imaging, the maker of a camera in a capsule to diagnose digestive ailments, which rose 2.5%.

In the bond market, however, prices were sharply lower. The Tel-Bond 20 index ended down 0.3%, the Tel-Bond 40 by 0.25% and the Tel-Bond 60 by 0.23%. The government's shekel bond for 10 years dropped 0.8% to raise its yield to 3.85%. Inflation-index Galil bonds for the same term were also down 0.8%, with yields rising to 1.61%.

The contradictory trends could all be traced back to Wall Street on Friday, where stocks jumped 1% and the dollar rallied while Treasury debt prices fell. The reason was a report showing U.S. jobs growth was better than expected in June while the two previous months of gains were revised higher. The data were seen by the markets as increasing the likelihood that the U.S. Federal Reserve will begin cutting its massive monetary stimulus, known as quantitative easing, as early as September.

The Dow Jones industrial average rose 1% to 15,135.84, the S&P 500 also gained 1% to 1,631.89, and the Nasdaq Composite similarly rose 1% to 3,479.38. The U.S. 10-year Treasury yield rose to as much as 2.7324%, the highest in almost two years. The U.S. dollar hit a five-week high versus the yen and a six-week peak against the euro.

"The weekend served to underline the risk of holding-term government bonds," said the Halman-Aldubi investment house. "The fears that the quantitative easing program will end is causing investors to reduce their bond holdings, which has a direct impact on Israeli government bonds as well."

The U.S. currency strengthened some 0.3% against the shekel on Friday to a Bank of Israel rate of NIS 3.6450. The euro, however, took a big hit, losing 0.6% to the Israeli currency to NIS 4.6967.

On the TASE, The Israel Corporation finished the session up 0.9% amid a spate of good and bad news. On the one side, bondholders rejected a proposal by its Zim unit to delay granting them some $25 million in collateral and leaving a question mark over the shipping company's finances. On the other side, the holding company's OPC power-generating station began operations last week. In addition, The Sunday Times reported that the holding company planned to list its non-core assets as a separate company traded on the London Stock Exchange.

IDB Holding Corporation saw its share price drop 5.9% and its bonds drop sharply on news over the weekend that Argentine businessmen Eduardo Elsztain would not be injecting more capital into the group. Bondholders expressed little interest in the latest debt proposal IDB was offering on Sunday.

However, shares in IDB's Discount Investment Corporation unit edged higher after it raised NIS 224 million in Series Vav bonds from institutional investors.

Shari Arison's Housing & Construction Ltd. finished 2% higher after it completed the sale of its remaining 25.5% stake in Route 6 for NIS 683 million. The company will post a gain of about NIS 63 million from the sale.

The most actives were led by Israel Chemicals, which dropped 0.6% on turnover of NIS 28.8 million. Other heavily traded shares included property developer Gazit Globe, which declined 0.7% as NIS 20.7 million in shares changed hands.

Reuters contributed to this report. 

Reuters